Empire of Thailand (IOT14)/2106 economic reform
Thailand's 2106 economic reform was a programme engineered by Chancellor Yingjang Shinawatra in an attempt to rapidly industrialize the country through free market incentives, using a combination of corporate tax cuts, wage suppression, and the conversion of the entire agricultural sector into state-controlled sharecropping. The government claimed the reform was integral to the rise in Thailand's GDP in ensuing years, but the policy was widely criticized abroad for fostering dependence on foreign capital and worsening income inequality, with the command economy management of farms lambasted as murderously inefficient and antithetical to Bangkok's alleged shift to a capitalist economy. Platform Shinawatra's general strategy was to incentivize investment from foreign corporations that would establish factories and import manufacturing technology. A second objective not stated at the time was to increase the government's direct control of domestic revenue through what amounted to rent-seeking. Corporate taxation and wage control Shinawatra created the Investment in Thailand Organization as an advertising and coordinating body for foreign investors. It also handled capital subsidies to foreign and domestic developers. ITO was funded through blanket wage cuts to public-sector employees. Concurrently, corporate taxes were drastically slashed from 30% to 7% with particular focus on encouraging entrepreneurial business. Agriculture and price fixing The most controversial measure was the complete restructuring of the agricultural sector into state-managed sharecropping. Farmers were not taxed in cash but forced to yield three-tenths of their produce to the government. Two-thirds of this extract were sold in state-controlled home markets above normal price, while the remainder was exported at artificially low price to undercut neighbour countries' home markets, with all profit going to the national treasury. Complementary legislation mandated that private retailers had to set prices on food 6% higher than state markets. As Shinawatra explained in a 2113 interview, the goal was to increase direct government revenue by coercing exclusive use of state-controlled markets."Interview with the Thai chancellor", Diplomatic Immunity, 2113 Land reform As part of the agricultural restructuring, citizens owning more than 700 acres of land were forced to cede 200 acres to state control. This land was in turn parcelled out to the unemployed for use as small farms. In recompense, donors received unspecified tax cuts of 8%, or in the case of farmers, the sharecrop was reduced to one-fifth. These new farmers were provided start-up capital through the Farming Organization, funded by sales revenue from government markets. Criticism Skeptics charged that the reforms undermined long-term economic stability by fostering dependence on foreign capital and worsening domestic wealth disparity. While corporate subsidies may have attracted increased investment abroad, the policy included no measures to protect the new jobs during economic downturn. Wage suppression of public workers also reduced income tax revenue and citizen spending power, negatively impacting growth and state-directed domestic development. The government's aggressive attempt to export food products below average international prices threatened to encourage trade partners to retaliate with protective import tariffs. Bangkok's pursuit of free trade thus seemed more about facilitating technology transfer than its immediate benefit to Thailand's economy. The government aimed to supplement this revenue shortfall through the agricultural reform, but detractors attacked its methodology as fundamentally flawed in several key aspects. The sharecropping strategy was criticized as disproportionately punitive to smaller farms (and encouraged by the land reforms), while the state's use of arbitrary price controls to favour its distributors put farmers into competition against their own produce. Bangkok's emergency relief fund, which paid a conditional compensation of 40% of the sharecrop's expected revenue (or 12% of the farm's productive value), was considered woefully inadequate to support a farm facing insolvency. When challenged in a 2113 interview that the Thai government was profiteering, Shinawatra's reply was evasive and confusing. Robert Can't admitted to applying an "insanity filter" to Thailand's domestic policy in calculating roleplay bonuses (essentially ignoring its effects), implying that had the economic reform been properly accounted for, it would have wrecked the country's playability. References * "Economic Reforms in Thailand", 2106 Category:Economic policy Category:IOT14